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TAX AUDIT U/S 44AB SALES, TURNOVER OR GROSS RECEIPTS LIMIT & MEANING

The tax audit was introduced by section 11 of the
Finance Act, 1984, which inserted a new section 44AB with effect from 1st
April, 1985 [Assessment Year 1985-86]. This section makes it obligatory for a
person carrying on business / profession to get his accounts audited by a
chartered accountant, and to furnish by the ‘specified date’, the report in the
prescribed form of such audit,

A.For a Business, if the total sales, turnover or gross receipts in such
business in therelevant previous year exceed or
exceeds the prescribed limit (Rs. One Crore w.e.f. A.Y. 2013-14).

B.For a profession, the provisions of tax audit become applicable, if his
gross receipts inprofession
exceed the prescribed limit (Rs. Twenty five Lakhs w.e.f. A.Y. 2013-14) in the
relevant previous year.

C.For a Business, if the profits are deemed to be profits of such person
under section 44AEor 44BB
or section 44BBB, if the assesse claims his income to be lower than the limits
specified under these sections.

D.For a Business, if the profits are deemed to be profits of such person
under section 44AD,if the
assesse claims his income to be lower than the limits specified under the said
section and his income exceeds the maximum amount not chargeable to tax.

SR No

FINANCIAL YEAR

LIMIT (BUSINESS)

PROFESSIONAL

1

2009-10

40 LAKH

10 LAKH

2

2010-11,2011-12

60 LAKH

15 LAKH

3

2012-13 ONWARDS

100 LAKH

25 LAKH

MEANING OF SALES, TURNOVER OR GROSS RECEIPTS

SALES/ TURNOVER

Turnover is the aggregate amount for which
sales are affected or services are rendered by anenterprise.

Not to be deducted:

1.Cash discount otherwise than that
allowed in a cash memo/sales invoice is in the nature of a financing charge and
is not related to turnover. The same should not be deducted from the figure of
turnover.

2.If sales tax and excise duty are
included in the sale price while accounting, then Turnover shall include these
taxes.

3.Scrap
Sales shall form part of Turnover.

To be
deducted:

1.Trade discounts (i.e. Discount
shown in Sales Invoice) can be deducted from sales but not the commission
allowed to third parties

2.Turnover discount is normally
allowed to a customer if the sales made to him exceed a particular quantity.
This being dependent on the turnover, as per trade practice, it is in the
nature of trade discount and should be deducted from the figure of turnover
even if the same is allowed at periodical intervals by separate credit notes.

3.If the Excise duty and/or sales
tax recovered are credited separately to Excise duty or Sales tax Account
(being separate accounts) and payments to the authority are debited in the same
account, they would not be included in the turnover.

4.Sales
Returns

5.Sale
proceeds of any shares, securities, debentures, etc., held as investment

6.Sale proceeds of property held as
investment property

7.Sale proceeds of fixed assets

In case of Consignment Sale/Share Brokers:

If Property in Goods and its significant risk and rewards are
transferred to the Agent, the Sale Price of such goods shall form part of “Turnover”
for the Consignment Agent. If not, the sale price shall not be taken into “Turnover”.
Share Brokers also purchase and sell shares on behalf of their customers only,
and act as an agent hence the Sales of such shares shall not form part of
Broker’s Turnover.

In case of Shares, Securities & Derivatives:

Speculative
Transactions/ Derivatives/ Futures & Options:

Difference
of each transaction shall form part of Turnover. Both Negative & Positive
Differences shall be added to arrive at the “Turnover”.

Delivery
based Transactions:

Total
value of sales shall be “Turnover”.

GROSS RECEIPTS

Gross Receipts will include all receipts whether
in cash or in kind arising from carrying on ofthe business which will normally be assessable as business income
under the Act.

To be
included:

1.Export
incentives.

2.Duty
Drawback of Excise, Service Tax or Customs.

3.Lease
rentals in case such income is chargeable under Business Income

4.Interest
received by a Money Lender

5.Advance
Received and forfeited from Customers

6.Insurance
Claims – Except for Fixed Assets

Not to be
included:

1.Dividend
on Shares except in case of assessee dealing in shares

2.Write back of amounts payable to
creditors and/or provisions for expenses or taxes no longer required.

ASSESSEE HAVING MORE THAN ONE BUSINESS

In cases, where the assessee carries on more than one business activity,
the aggregate sales, turnover and/or gross receipts of all such businesses
carried on by the assessee would be taken into consideration in determining
whether the prescribed limit laid down under section 44AB has exceeded or not.

However, in case the Turnover of a particular business of the assesse is
covered under section 44AD/AE/B/BBA and if the assesse opts to be assessed
under these sections on presumptive basis, the Turnover of such business shall
be excluded to arrive at the limit prescribed by section 44AB. (i.e. Rs. 1
Crore at present).